Electricity Price Review

The EPR dashboard

The dashboard below outlines progress towards key work streams led by the Ministry of Business, Innovation and Employment. The Electricity Authority is leading a number of other work streams.

MBIE work streams

Strengthening the consumer voice

Establish the consumer advocacy council

EPR found that smaller consumers struggle to make their voice heard and influence the electricity sector. The obstacles include the sector’s complexity, consumers’ lack of resources, and cultural differences and language barriers.

Government has established the Consumer Advocacy Council to be the trusted, credible, authoritative and independent advocate for residential and small business electricity consumers. Its role is to advocate on behalf of these consumers by providing evidenced-based advocacy on policy and regulatory consultations, and in decision-making processes. Funding was announced in August 2020 as part of a $17 million budget package for consumer advocacy and energy hardship.

The Council Chair was announced in July 2021. The other Council members were announced on 22 July 2022.

Chair of Consumer Advocacy Council announced(external link) — Beehive.govt.nz media release

Consumer Advocacy Council members appointed(external link) — Beehive.govt.nz media release(external link)

A Secretariat to support the Council was established in September 2021.

The Council’s Terms of Reference is available below:

Visit the Consumer Advocacy Council website to find out more, including key achievements to date, details about Council members, published research, submissions and details about the Council’s work programme.

Consumer Advocacy Council website(external link)

The establishment of the Consumer Advocacy Council supports the economic factors needed to improve child and youth wellbeing in the Government’s Child and Youth Wellbeing Strategy action plan.

Find out more on the Child and Youth Wellbeing website (external link)

Electricity Price Review – recommendation A1 [PDF, 854KB](external link)

Reducing energy hardship

Establish a cross-sector energy hardship group

The causes of energy hardship extend beyond the electricity sector, and the solutions require joint action. Government has established an Energy Hardship Expert Panel to recommend policy priorities and actions to alleviate energy hardship in New Zealand, and the Energy Hardship Reference Group to provide a forum to share information and encourage coordination across industry, NGOs and government agencies. Funding was announced in August 2020 as part of a $17 million budget package for consumer advocacy and energy hardship.

Members of the Energy Hardship Expert Panel were announced in September 2021 and have been appointed until 30 June 2023, unless their work is completed sooner.

Members of the Energy Hardship Reference Group were announced in December 2021 and have been appointed for a 12-month term.

Energy hardship expert panel and reference group

Electricity Price Review – recommendation B1 [PDF, 854KB](external link)

Define energy hardship

After extensive research, data analysis and consultation, MBIE has developed an agreed definition of energy hardship and a framework that illustrates the inter-related factors affecting energy wellbeing and hardship. 

MBIE is now analysing feedback on its draft associated measures, that once finalised, can be used to understand the different dimensions of energy hardship. The final measures can be used with the definition to help understand those in energy hardship, develop or focus initiatives aimed at reducing energy hardship, and assess the effectiveness of initiatives to address energy hardship.

Defining energy hardship

Electricity Price Review – recommendation B2 [PDF, 854KB](external link)

Build a network of community-level support services

The Support for Energy Education in Communities (SEEC) Programme  has been established to fund community-level energy education to help households in need. The programme aims to progressively link and expand existing support services to establish a nationwide network of organisations offering credible, independent, electricity-specific advice and support services to those in energy hardship.

Nearly $8 million of funding is available over four years through the Programme’s funding rounds. Eligible groups, businesses and organisations can apply for funding to expand the capacity of existing energy hardship initiatives, pilot a new scheme, or deliver related training. The Programme also includes funding for the selected projects to further provide households with low-cost energy-saving equipment.

See more information about the SEEC Programme, upcoming funding rounds and funded projects to date:

Support for Energy Education in Communities Programme

Electricity Price Review – recommendation B3 and B4 [PDF, 854 KB]

Prohibit prompt payment discounts

The EPR found that prompt payment discounts (PPDs) are excessively high and not cost reflective. They cause additional hardship for those that can least afford it, and they contribute to customer confusion when comparing prices.

The Minister of Energy and Resources wrote an open letter in November 2019 to retailers highlighting the unfairness of PPDs and inviting them to ensure that any PPD offered is reasonable. A follow-up letter was sent to retailers in July 2020 requesting details on retailers’ PPD offers to inform future decisions.

The Electricity Authority monitors retailers’ early payment discounts and late payment penalties. The analysis of the data it collects helps to inform the Ministry’s consideration of appropriate next steps to address the EPR findings and recommendations. The Ministry also regularly collects information on retailers’ PPD and late payment policies.

There have been encouraging signs from this monitoring that retailers are gradually removing PPDs from their retail plans. Monitoring of these efforts continue. The Minister has made it clear that regulation to address the EPR’s findings on PPDs remains an option.

Electricity Price Review – recommendation B7 [PDF, 854KB](external link)

Arrangements for vulnerable and medically dependent consumers

EPR recommended that the government establish mandatory minimum standards that distributors, retailers and others must meet when providing electricity or related services to vulnerable and medically dependent consumers. The Electricity Authority should monitor and enforce the standards.

The Electricity Authority has developed new Consumer Care Guidelines, which took effect from 1 July 2021, that replace the existing arrangements for vulnerable and medically dependent consumers. This work forms the first phase of progressing this EPR recommendation, and MBIE officials are liaising with the Electricity Authority. More information can be found on the Electricity Authority’s website.

Consumer care guidelines(external link) — Electricity Authority

Subsequent phases will depend on the outcome of the first phase, and on progress with related EPR activities, particularly the passage of the Electricity Industry Amendment Bill which would clarify the Electricity Authority’s ability to enforce consumer protection measures such as mandatory minimum standards.

The Authority published the ‘Consumer Care Guidelines – Overview for domestic consumers’ in September 2021. This overview provides information to consumers on the type of experience they can expect from electricity retailers following the guidelines.

Electricity Consumer Care Guidelines – Overview for domestic consumers [PDF, 335KB](external link)

Electricity Price Review – recommendation B6 [PDF, 854KB](external link)

Improving transmission and distribution

Issue a GPS for transmission and distribution pricing

EPR recommended government should issue government policy statements (GPS) to the Electricity Authority that should shape its preparation of new guidelines for setting transmission and distribution prices. Further work in this area was paused while the Authority completed its Transmission Pricing Methodology (TPM) work programme and developed its approach to reforming distribution pricing. MBIE is considering whether there is a need to issue a GPS given the progress that the Authority has made.

Electricity Price Review – recommendation E1 and E2 [PDF, 854KB](external link)

New powers for the Commerce Commission to regulate distributors

The EPR considered that the Commerce Commission lacks sufficient powers to address certain future issues identified in the regulation of distributors. The EPR’s recommendation does not address any significant or pressing problems but is aimed at making the regime more flexible for the future. Providing such flexibility needs to be balanced against the certainty that the current economic regulation regime provides.

Before progressing changes, further policy work is required, including the development of clear policy rationales and an assessment of alternatives to the EPR’s recommendation. The policy work also needs to be balanced against other priorities in the economic regulation policy area.

Electricity Price Review – recommendation E4 [PDF, 854KB](external link)

Improving the regulatory system

Amend the Electricity Industry Act

Government has made amendments to the Electricity Industry Act 2010 in response to EPR findings and recommendations.

These include:

• provisions relating to Consumer Advocacy Council (power to appoint and recover costs from industry participants)
• giving the Electricity Authority a specific consumer protection function
• giving the Electricity Authority clearer powers to regulate network access agreements
• giving the Electricity Authority more flexible powers to regulate distributors’ involvement in contestable electricity markets
• clarifying the Electricity Authority’s information gathering powers.

The Government also provided a regulatory backstop to ensure timely action by industry and the Electricity Authority on matters relating to specific EPR recommendations improving the wholesale and retail markets.

The Electricity Industry Amendment Bill was introduced to the House in September 2021 and was passed in August 2022. Visit the Parliament website for more information on the Bill, including the links to submissions and Select Committee’s report.

Electricity Industry Amendment Bill(external link) — New Zealand Parliament

Phase out low fixed charge tariff regulations

The EPR found that the low fixed charge tariff regulations are poorly targeted and result in a number of unintended consequences. The EPR recommended that the regulations should be phased out because they worsen energy hardship for some households and promote inefficient choices for new technologies, such as rooftop solar and electric vehicles. They also increase pricing complexity and confusion, making it harder for consumers to shop around for the right electricity plan.

Government acknowledged the EPR’s findings on the regulations, but was mindful of the potential impacts of a phase-out. MBIE engaged with industry and consumer groups to better understand the likely impacts, and designed a phase-out mechanism that balances ensuring a just transition with taking meaningful steps to reduce the harm the regulations create.

In September 2021, Government agreed to phase-out the regulations and announced it had secured industry commitment to develop and fund a power credits scheme to support low-income households struggling with higher power bills while the regulations are being phased-out. 

In December 2021, amendments were made to the regulations to allow for the phase-out of the low fixed charge regulations. The phase-out commenced 1 April 2022 and will continue over 5 years to April 2027, at which point the regulations will be repealed.

Phasing-out low fixed charges tariff regulations

Electricity Price Review – recommendation F4 [PDF, 854KB](external link)

Update the Electricity Authority’s compliance framework

The EPR recommended that government should review the compliance framework in the Electricity Industry Act 2010 and related enforcement regulations to bring them up to date with best practice. Changes to primary legislation relating to the compliance framework were incorporated into the Electricity Industry Amendment Bill. The Bill received Royal assent on 31 August 2022. The amendments:

• increase the maximum penalty for a code breach from $200,000 to $2 million;
• allow an additional $10,000 penalty for each day that a breach continues;
• give the rulings panel discretion to award costs whether or not it determines a breach has occurred; and
• clarify that code breaches resulting from a series of closely related events are treated as a single breach subject to a single penalty rather than separate breaches subject to multiple penalties.

Updating the Electricity Authority’s compliance framework also requires amendments to the Electricity Industry (Enforcement) Regulations 2010. Work is progressing on these regulatory changes and is expected to be completed by early 2023.

Electricity Industry Amendment Bill(external link)

Further details can be found in the following documents:

Submissions received

Electricity Price Review recommendation F3 [PDF, 854 KB]

Preparing for a low-carbon future

Explore new institutional arrangements for energy policy and regulation

EPR recommended government explore new institutional arrangements in the energy sector. This reflects the importance of fit for purpose energy institutions in facilitating the transition to a low-carbon economy. EPR did not identify any major concerns with the existing arrangements.

In response to this recommendation, changes have been made in the approach and focus of the Council of Energy Regulators to improve co-ordination and engagement amongst its five member agencies: the Commerce Commission, the Energy Efficiency and Conservation Authority, the Electricity Authority, the Gas Industry Company and MBIE. The Ministry will continue to explore further opportunities to strengthen co-ordination amongst the Council’s member agencies as part of its on-going work and engagement.

Preparation of the government’s Emissions Reduction Plan under the Climate Change Response Act and the development of an Energy Strategy also provide opportunities, and strengthen the need, for greater coordination across government.

Electricity Price Review – recommendation G3 [PDF, 854KB](external link)

Improve building energy efficiency

In May 2021, MBIE publicly consulted on proposed Building Code changes that would make homes and buildings warmer, drier, healthier and more energy efficient. In November 2021, MBIE announced it is proceeding with changes to energy efficiency for housing and small buildings, energy efficiency for large buildings and energy efficiency for heating, ventilation and air conditioning (HVAC) systems in commercial buildings.

2021 Building Code Update(external link) — Building Performance

In addition, the Government has established the Building for Climate Change programme to deliver a step-change in energy efficiency for new and existing buildings. The programme intends to reduce emissions from buildings during their construction and operation, and ensure New Zealand’s buildings are resilient enough to withstand changing climate conditions. The programme will play a key role in the Building and Construction sector’s contribution to the Emissions Reduction Plan.

Building for climate change(external link)

Background: Why the review was conducted

In April 2018, the Minister of Energy and Resources commissioned an independent review into New Zealand’s electricity market. This was because electricity prices, especially for residential consumers, increased faster than inflation for many years, putting pressure on household budgets. In comparison, prices faced by commercial and industrial customers remained relatively flat.

Such reviews are not new. Since the 1970s, New Zealand has reviewed its electricity sector roughly every decade – each time substantial changes have been made to improve or correct the sector’s performance. In the 1980s and 1990s, the sector was privatised to improve commercial performance, and a light-handed regulatory regime was developed. By the 2000s, concerns about industry performance and self-governance arrangements resulted in further improvements being made, including developing new regulations and improving market competition to restrain retail prices to efficient levels.

However, the 2018-19 review was unique as it addressed the need for electricity prices to be fair and affordable, not just efficient or competitive. Another novel element was the review’s focus on the consumers’ point of view and their say in the direction of the sector.

This review also considered how to future-proof the sector and its governance structures to help ensure the electricity sector functions well during New Zealand’s transition away from carbon-based fuels – a consideration that will become increasingly important as electricity meets more of New Zealand’s energy needs, and as new technologies are adopted.

As energy production and consumption is such an integral part to New Zealand’s economy, this review was of great interest to the industry and the public.

Further background

More information on the review process